Question

The following is an income statement for Flux Corp. for its most recent fiscal year. The controller for the company, Marjorie Summit, has asked you to review the statement and make any required corrections to it and submit a memo to her. Multiphone Corp. Income Statement As of December 31, 2019 Sales revenue Cost of goods sold Gross profit $ 975,000 330,000 645,000 Operating expenses: General and administrative expenses Interest expense Selling expenses Loss from inventory write-down Total operating expenses Operating income 96,000 142,000 128,000 54,000 420,000 225,000 Other income (expense): Restructuring costs Loss on discontinued operations Total other income, net (18,000) (42,000) (60,000) Income before income taxes Income tax expense Net income 165,000 49,500 115,500 Additional information: 1. The tax rate is 30%. 2. The company disposed of its retail segment in 2019. The segment incurred an operating loss of $83,000 for the year.

Answer 1

Multiphone Corp. Income Statement As of December 31, 2019 $ 975.000 339000 Sales Revenue LESS : cost of goods sold Gross Profit 645,000 96000 Less: Operating expenses: General and Administrative expenses Interest expense Selling expenses 142,000 128.000 loss from Inventory 54000 write down Operating loss of segment 8 3000 for the year Total operating expenses Operating income 503,000 142.000

Qui Other Income (expense): Restructuring Costs (18000) Loss on discontinued operations (42000) wral other income net 1 C 60,000) Income before Income taxes 82,000 Less: Income tax expense 24,600 Net Income 57400 the amount of loss on of inventory on written - down is relatively small, it can be reported as part of the cost of goods sold. If amount of loss write-down of Inventory is significant, it should be reported se perately in Income statement. Here, I assumed that the amount of loss of Inventory is significare write - down amount, so 1 reported it as seperately on

There is operating loss of $83000 Incurred on disposed retail segment. So, the total operating expense will increase and decreased to $ 142,000 will operating Income Income before Income taxes is 82000 Here tax rate is 30% So income tax - $82000 x 30% = 24,600 the All these changes decreases $ 115,500 to $57400 of P Net Income